Attract and Educate Youth

Building a relationship now will pay dividends down the road

March 26, 2013

Financial education can turn young consumers into lifelong members.

They don’t borrow much, if at all. They don’t make regular deposits. Most are unemployed. They don’t have credit histories. Almost all of them still live with their parents. Not exactly your target market, right? Wrong.

Just because young consumers aren’t profitable today doesn’t mean they won’t be tomorrow. Credit unions with foresight—and their competitors—are throwing them parties and handing out prizes just to get them in the door.

Young members today represent your credit union’s tomorrow. Eventually they’ll borrow money for college, cars, and houses. They’ll get jobs and need checking accounts, savings accounts, and individual retirement accounts.

In other words, they grow up.

Along the way, they’ll develop credit histories based on their financial behaviors. They’ll buy insurance, make investments, and they’ll meet with financial planners to figure out how to reach their goals. They can’t do all of that—they really can’t do any of that—alone. They’ll need a financial institution every step of the way.

That’s part of what motivates credit unions to invest in youth today, even though they don’t currently generate much, if any, revenue. Building relationships with them now is easier than waiting until they’ve established financial relationships with competitors. And it all starts with education.

“The sooner you connect with them, the sooner they know what a credit union is, and the sooner you can get them involved,” says Lynn Wright, marketing director at $825 million asset SAFE Federal Credit Union in Sumter, S.C. “This also means it’s more likely they’ll make your credit union their primary financial institution. It’ll become a lifelong financial partnership.”


Banks aren’t waiting around, cautions Leigh Brady, senior vice president of education services at State Employees’ Credit Union (SECU)—a $25 billion asset credit union in Raleigh, N.C. Brady points out that large banks often partner with colleges and universities to operate student account cards—stored-value cards that college students swipe at the cafeteria or the student union to pay for meals or books from prefunded accounts. The cards feature bank logos and the campus might also include bank signage, giving these banks a significant presence in students’ lives. This makes it nearly impossible to compete, says Brady.

“We’re not going to buy the relationship [through a contractual agreement with colleges and universities],” Brady says. “If we don’t reach them before that, however, it’s difficult to reach them afterward.”

Those early adult years are crucial, too. Peak borrowing begins at about age 25 and continues until 44, according to CUNA’s National Member Surveys. So the earlier credit unions can enroll members, the more of that early borrowing they can capture.

SECU relies on research that shows young adults stay with their first financial institutions for seven to 10 years. If those years span at least part of the decade after high-school graduation, SECU could provide former youth members with all kinds of lending products: car loans, school loans, and even mortgages.

“We’re here to help,” Wright says, and that’s why the credit union offers member education resources through CUNA’s online EDGE personal finance products. “We’re not just here to give out loans; we’re here to educate our members and help them save time and money.”

Brady agrees. “We bring a lot more value to the relationship than a bank would,” she says. “That’s why it’s important for us to get in early.”

NEXT: Accounts and outreach

Accounts and outreach

The get-in-early strategy at SECU is a multifaceted approach that involves community outreach, education, direct marketing to existing members, and participation in CUNA’s National Credit Union Youth Week each April. Just last year, SECU added 614 new youth accounts and more than $3 million in new deposits during the week of deposit challenges and other events.

SECU divides its youth membership into two groups:

1. Fat Cat is a branded program for children from birth to age 12. It has its own website, newsletter, and savings games along with a mascot that appears at schools, parades, and other community events.

2. Zard is geared toward teens. It also has its own website and promotions, and provides small loans for that first car plus checking and money market accounts to manage those first paychecks.

Beyond its two savings programs, SECU engages in far-reaching financial education and service programs. Staff members teach Biz Kid$ and National Endowment for Financial Education (NEFE) programs. In 2012, SECU instructed more than 68,000 students statewide. And the SECU Foundation awards annual scholarships as well.


“We’re out there and we’re becoming more visible to the youth and their parents in our state,” Brady says. These efforts build relationships, and set SECU apart from other financial institutions.

Even if these efforts don’t translate directly into new members, Brady believes there’s value in sharing the credit union’s expertise. “Not every child is going to become a credit union member, but everyone has an opportunity to become a financially educated consumer, and I think that goes a long way toward helping a young person in life,” Brady says.

Wright agrees. In addition to a two-tier youth account program, movie events every six months, contests, prizes, and even personalized debit cards for members when they turn 15, SAFE also teaches the NEFE curriculum to its members and operates a local high-school branch.

It’s the same at Directions Credit Union—a $560 million asset credit union serving Toledo and northwest Ohio. Financial education is a cornerstone of youth outreach at Directions. “It’s never too early to learn about money,” says Brenda Covrett, vice president of growth and development. The credit union helped nearly 200 children make deposits during Youth Week in April last year.

Like SECU and SAFE Federal, Directions offers two-tier youth savings account program. To distinguish its youth accounts from those of competitors, Directions pays a slightly higher rate for youth accounts than for regular savings accounts. The credit union also allows children to personalize their savings accounts.

“If they want to save for an Xbox or an iPad,” says Covrett, “we can set up a special account, so when they check their accounts online, they see “My iPad Savings Account” or “My Xbox Savings Account,” Covrett says.

The credit union’s most successful youth program might just be part of its financial literacy outreach efforts. Directions offers hundreds of hours of financial education reaching thousands of children and teens every year. The credit union also works closely with area schools, churches, summer camps, and other community organizations. Employees even volunteer to read books about money during story times at local libraries.

The standout, though, is Finances 101. This is experiential game of life the Northwest Ohio Credit Unions—a regional league chapter—offers. The chapter presents the game at events throughout the year. One of those at Bowling Green University last October attracted more than 700 students who showed up work their way through a month of expenses and life circumstances.

Students start by drawing a card to determine their careers and marital status. Then they’re assigned a certain amount of credit card and student debt. A roll of the dice determines how many kids they have, any. Then they have to buy a car, find a place to live, and meet other monthly expenses while encountering setbacks and opportunities as they move through the game. The goal is to finish with some savings and enough money to pay bills. Not all students accomplish that, but all quickly figure out that money doesn’t go as far as they thought it would.

Covrett says the program is so successful that the chapter sometimes has to turn away schools that want to participate. In response, the chapter created an online version for teachers to take into their classrooms.

At Directions, the chapter participation and other educational efforts are part and parcel of the credit union’s mission and commitment to the region it serves. For that reason, Covrett says, the credit union doesn’t try to link revenue to its educational programs. “We don’t really look for a return on investment,” she says. “We look at our outreach as our investment in, or our giving back to, our community.”

But, like both Brady and Wright, she acknowledges that she hopes the educational outreach will eventually translate into increased membership somewhere down the road, as teens become adults and recognize that not all financial institutions have their best interests at heart.

“If we can make them aware of the credit union difference, we’re hoping they’ll continue their relationship with us when they turn 18,” she says.

NEXT: Age-appropriate education and services


Age-appropriate education and services

The financial services credit unions offer to children and the lessons they teach become more sophisticated as children get older. “It’s a progression of financial education,” says Jennifer Tai, marketing specialist for NuVision Federal Credit Union in Huntington Beach, Calif. While the credit union works with 13 area schools to deliver its financial literacy program, Tai says it also builds education into the products themselves.

NuVision Federal, with $1.2 billion is assets, has three levels of youth accounts. Children are eligible for checking accounts and debit cards when they reach age 13. With $106 ATM limits—enough for $100 plus any fees—the NuVision youth debit cards allow young teens enough opportunity to make some relatively significant financial decisions, Tai says, but not more than they can handle. Parents are linked to the accounts, and they—not their children—are ultimately responsible for any missteps.

The goal is to give children the chance to make some real decisions and maybe even some mistakes while the stakes are low, the supervision is high, and the learning opportunities and consequences are immediate, Tai explains. That way, when these children go off to college and are out of their parents’ purview, they’ll know how to use debit cards and credit cards responsibly. That’s certainly good for them, and for credit unions, if it prevents a delinquency down the road.

“Financial education results in better members and customers for everyone,” Tai says. “Regardless of who teaches the financial lesson, we all benefit.”


But Tai also believes the credit union should do the teaching, and it uses tools like CUNA’s online EDGE products. “We’re building that relationship,” she says. “We trust them and they trust us. We’re holding their money. We all know that banking is a habit, and no one wants to change financial institutions. If your current institution has what you need, you’re going to stay.”

Tai concedes that some credit union leaders might balk at seventh-graders carrying plastic, but she believes some are ready. The program is heading into its fifth year, and Tai is wondering if NuVision Federal needs to start even younger.

“We thought we were being progressive when we started giving debit cards to 13-year-olds,” Tai says but that’s changing. A local bank is offering debit cards to children when they turn 12, she notes.

Immediate returns

Not only do youth programs create more financially literate consumers, they also turn parents into better credit union members, Tai says. “Families that have youth accounts with the credit union tend to do more business with us,” Tai says. “We see, on average, an extra service per household. These members are coming into the branch more oft en.”

The children, probably drawn by contests and prizes, are bringing their parents into the branches where they have a chance to ask questions about products and become familiar new services.

“When parents know there’s a financial institution that has something for everyone in the family,” Tai says, “that’s where they’re going to go.”

While many credit unions establish youth programs with an eye to the future, they actually start reaping the rewards right away.